Wednesday, 25 December 2013

Acquisition – Contract Management

Midsize
IT companies are the usual suspects who fall to acquisitions and mergers. These
are the easy fallen prey to the industry financial crisis and they do not have
the necessary funds to back them in such crisis. Despite these hiccups, midsize
companies are growing rapidly since they are flexible and adapt according to
the customers’ needs. The bigger companies keep an eye out for such mid tier
firms and are always looking out for acquiring them in the long term.The
acquisition basically happens for industry growth, technology acquisition,
venturing into new business domain, rights to intellectual assets and vertical
integration and so on. Mergers and acquisitions are happening all over the
market but the difference between a successful merger and an inappropriate
acquisition lies in its execution. A successful integration is a sensitive
matter and needs to be done through a diligent process in place. For example if
an IT organization that provides IT services acquire a firm which provides
contract management as a service. After the merger is done, the first task is
to understand their business process and structure and later on do due
diligence on their market strength, visibility, revenues & profit margins,
risk analysis and other obligations which come with the acquisition. The next
step is gathering all the information of the company’s assets, departments and
their related vendors. These can be done through –

Annual
company reports – this might show you the revenue details, profits margins and
loses if any

Files/Databases
– will provide the information for the various contracts and their due dates

Assets
– look for the important assets that you own and any other obligations
surrounding them

Once
you have collated all the information, the next question is where you store
this data. The common approach is spreadsheet. But in the long run it is
certainly not good enough. For year on year data you might want to have repository
systems wherein you can feed in all the details and their documentation. The
spreadsheet method is a far gone by and it consumes a lot more time since most
of the work is manual. The best way to overcome this is switching to one of the
online tool applications wherein you can access it 24/7 anywhere. There are
many advantages to it as well. You can purchase a tool available from the
market itself or you can build your own tool by selecting the metrics that you
want to track. This gives you flexibility and a customizable approach through
which you can define your fields to track.

The
tool will also enable you import and export your support documentation and
reports. You can also put in the contracts into the systems, which will also
eliminate the process of maintaining the hard-copies. This can be covered by
assigning digital signatures to the contracts. Also when you are done with the
acquisition, the initial stage is not to directly deal with contracts i.e.
transfer, renew, and cancel. But your first step will be consolidating the
existing data into one spot and then deal with their contracts accordingly.
Some contracts might be expiring in the next thirty days which will require
immediate attention whereas some might not be due for the next year or two.
This can dealt with in the later stages of their tenure. Hence it is important
to have a contract management tool in place or else you might end up doing the
entire work again if someone asked you to back to a particular record. The main
challenge in the entire acquisition process will be to integrate the people and
process and to transition them to the new tool without going back to the old
files.

About Author:Mihir Sakhle is consultant and part of Systems Plus Pvt. Ltd. He is a part of consulting team that delivers Sourcing and Vendor Managementg Office projects. He can be contacted at: mihir.s@spluspl.com

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